Proposed Law Set to End the Employee Retention Credit (ERC) Program and Enhance ERC Fraud Enforcement

Passed by the U.S. House of Representatives on January 31, 2024, the Tax Relief for American Families and Workers Act of 2024 is poised to permanently close the pandemic-era Employee Retention Credit (ERC) program. If enacted, the law would also extend the statute of limitations for ERC-related assessments and enhance the penalties for promoting fraudulent ERC filing schemes. Learn more from US International Tax Advisors:

What Maryland Business Owners Need to Know About the Tax Relief for American Families and Workers Act of 2024

While the Tax Relief for American Families and Workers Act of 2024 contains several provisions, one of the proposed law’s primary purposes is to aid in the federal government’s ongoing fight against ERC fraud. If enacted, the law will have three primary effects regarding the ERC:

1. Permanent Closure of the ERC Program

The Tax Relief for American Families and Workers Act of 2024 would permanently close the ERC program effective January 31, 2024. While the program has effectively been closed since September 14, 2023, due to an Internal Revenue Service (IRS) moratorium on new ERC claims, the proposed law would formally end the ERC program more than a year in advance of its original closure date.

2. Extended Statute of Limitations for ERC Fraud Enforcement

While the Tax Relief for American Families and Workers Act of 2024 would close the ERC program early, it would extend the statute of limitations for ERC fraud enforcement. If enacted, the proposed law will allow for imposition of ERC-related assessments until six years after the latest of:

• The date on which a return containing the ERC claim was filed;
• The date on which an ERC return is treated as filed under Section 5601(b)(2) of the Internal Revenue Code; or,
• The date on which the claim for a credit or refund under the ERC program is made.

This would give the federal government an additional year to target fraudulent ERC claims, signaling the government’s intent to continue investigating and prosecuting ERC fraud well into the future.

3. Enhanced Penalties for Promoters of Fraudulent ERC Filing Schemes

In addition to targeting businesses that improperly claimed the ERC, the IRS and other federal authorities are also aggressively targeting businesses and individuals suspected of promoting fraudulent ERC filing schemes. The Tax Relief for American Families and Workers Act of 2024 includes the following penalty provisions for promoters:

• Fines equal to the greater of $200,000 ($10,00 for individuals) or 75 percent of the gross income derived from promoting fraudulent ERC filing schemes; and,
• Retroactive enforcement of these penalties for violations dating back to March 12, 2020.

Our firm will be monitoring the Tax Relief for American Families and Workers Act’s movement through Congress and will provide an update if the statute is enacted in 2024.

Request a Confidential Consultation with US International Tax Advisors

US International Tax Advisors is a federal tax defense law firm that represents clients in audits, investigations and other ERC-related matters. To request a confidential consultation with US International Tax Advisors, please call 844-796-8565 or contact us confidentially online today.